A better way to reform the 'kicker'

Last week, Lane Shetterly and Tony Van Vliet made a case for increasing the stability of Oregon's budget by altering the state's unique "kicker" law ("Where Oregon must go from here," Jan. 27). What they argued was first proposed by the 2008 Task Force on Comprehensive Revenue Restructuring, of which Shetterly was chairman. I also was appointed to that task force by Gov. Ted Kulongoski, as a taxpayer representative, and I have a different view.

The task force found (and I agree) that establishing more reliable state income forecasting and more prudent budgeting are worthy goals. I don't agree, however, that the state is the best repository for ending balances under a proposed new forecasting method. That money rightfully belongs to the individuals and corporations who earned it.

The task force proposal basically requires the governor to develop a point estimate -- the state revenue forecast -- and then a range of roughly 6 percent above and below that point estimate. This would be an improvement over the current point-estimate-only approach, which is almost always wrong.

The problem lies in the proposal's requirement that only revenue above the top of the forecast range be returned to taxpayers in the form of kicker checks. This would have the practical effect of eliminating most kicker refunds that Oregonians have come to expect when state revenue exceeds estimates by more than 2 percent.

The proposal also requires that revenue above the point estimate but below the top of the forecast range be placed in a rainy-day fund of up to 10 percent of the general fund. The intent is to grow a more substantial fund that can help the state deal with recessions like the one we are in now.

But locking this entire proposal into the Constitution will simply make it easier for the state to avoid exercising the kind of real fiscal discipline that Oregonians should expect. The effect would be to permanently transfer billions of dollars from the private to the public sector into the foreseeable future. It also would be relatively easy for opponents to derail the effort by telling voters that it's simply an attempt to "steal our kicker."

In fact, the proposal is built on a fallacy. Its supporters assume that the kicker somehow has prevented the state from building a substantial rainy-day fund, when in reality there has been no legal prohibition against lawmakers budgeting for less spending than the state revenue forecasts would allow.

If, for example, the revenue estimate for a biennium is $15 billion, the Legislature is free to budget spending of $14 billion, and budget $1 billion toward the rainy-day fund. Legislators never do that, of course, not because it's legally prohibited, but because the political pressure to spend every dime is so strong.

The task force proposal effectively would allow legislators to grow government faster than the people have allowed it to grow under the current kicker law.

The state should accept the part of the task force proposal that improves state revenue forecasting, but reject the part that, over time, would transfer billions of dollars from the private to the public sector.

If legislators wish to grow a substantial rainy-day fund, they can ask voters to change the Oregon Constitution to require that they can only budget to spend up to the low end of the forecast range and save everything else up to the point estimate until the rainy-day fund has reached some predetermined level. This would leave the kicker law intact, restrain the growth of government and grow the rainy-day fund all at the same time. It would be reform that many taxpayers could enthusiastically support.